Michael Welsh

Jul. 21,2026 | CIO, AI

Shadow IT is hardly a new problem. Employees have been downloading unapproved applications since someone first realized they could avoid an IT service ticket by entering a credit card number.

Generative AI has made the problem faster, easier and considerably more complicated.

Today, an employee does not need to implement a major software platform to create a new technology expense or expose company information. They can subscribe to an AI assistant, connect a browser extension, authorize a plug-in or activate an AI feature already embedded in an existing SaaS product. The entire “implementation” might take less time than it takes to find the company’s procurement policy.

This is shadow AI, and it is turning an old visibility problem into a larger financial, contractual and operational one.

The business is not waiting for IT

Employees are not necessarily adopting unauthorized tools because they are reckless. Usually, they are trying to solve a legitimate problem quickly.

Microsoft and LinkedIn’s 2024 Work Trend Index found that 78 percent of people using AI at work were bringing their own AI tools into the workplace. The behavior also crossed generations, rather than being limited to younger employees. More than half of AI users were reluctant to admit using AI for their most important tasks.

That creates an awkward reality for IT leaders. The organization may still be debating its formal AI strategy, while hundreds or thousands of employees have already started executing an informal one.

Some are using free tools. Others are purchasing individual subscriptions. Departments may be buying separate AI applications that duplicate functions already available through Microsoft, Google, Salesforce, ServiceNow, Adobe or other strategic platforms.

Individually, each purchase can appear immaterial. Collectively, they can become a surprisingly expensive collection of small decisions nobody remembers making.

SaaS sprawl now comes with an AI upgrade

IBM defines SaaS sprawl as the unchecked proliferation of SaaS products within an organization. The consequences can include unnecessary spending, inefficient workflows, data silos and security risks. IBM also cites research indicating that nearly half of enterprise applications may be unmanaged, with nobody clearly responsible for monitoring usage, security, licensing or renewals.

AI adds another layer because it does not always arrive as a clearly identifiable application.

It may appear as:

• A standalone AI subscription
• An add-on to an existing SaaS agreement
• A consumption-based feature using credits or tokens
• An API connected to a business workflow
• A browser extension with access to corporate data
• An AI agent operating across several applications
• A premium product tier that includes AI, whether the customer needs it or not

The result is not simply “more software.” It is a growing web of overlapping licenses, variable consumption charges, data permissions and contractual obligations.

In other words, SaaS sprawl has learned a new trick. It can now generate its own usage charges.

The financial exposure is becoming measurable

Flexera’s 2026 AI Pulse Report found that 80 percent of surveyed organizations had increased AI investment. However, more than one-third reported overspending on AI applications, and 14 percent reported wasted AI spend. Flexera also found that 85 percent viewed gaps in IT visibility as a risk, while nearly half did not always know how or when employees were using AI tools.

The problem is not limited to unauthorized purchases. AI functionality is increasingly embedded in products companies already own. Suppliers may introduce new AI editions, usage pools, premium tiers or consumption metrics during a renewal.

A customer can pay for AI in several places at once:

• Directly through standalone applications
• Indirectly through upgraded SaaS bundles
• Variably through consumption charges
• Operationally through additional cloud infrastructure
• Quietly through unused licenses and duplicated capabilities

That makes the traditional annual application inventory insufficient. Knowing that the company owns 500 licenses is useful. Knowing how many are active, what AI features they include, how usage is metered, what data they access and whether another platform already provides the same function is much more useful.

Visibility should lead to decisions, not another dashboard

The answer is not to ban every new tool or launch a six-month committee to decide whether employees may summarize a meeting.

Organizations need a practical, repeatable process.

First, establish a complete inventory of SaaS and AI usage. That should include centrally purchased products, departmental purchases, expense-card subscriptions, embedded AI functionality, plug-ins, APIs and tools using corporate identity credentials.

Second, determine the actual business use case. A tool should not survive merely because someone used it twice and described the experience as “transformational.”

Third, measure adoption, utilization and overlap. Companies should identify which products are delivering measurable value, which duplicate strategic platforms and which have become expensive digital houseplants.

Fourth, review the commercial structure. AI agreements can involve user licenses, credits, tokens, API calls, actions, compute charges and minimum commitments. Customers need to understand rollover rights, overage rates, renewal increases, data-use provisions and the consequences of underconsumption.

Finally, assign ownership. IT, security, procurement, finance and business leaders need a shared operating model rather than five separate spreadsheets confidently disagreeing with one another.

The FinOps Foundation’s 2026 research reflects this broader shift. Ninety percent of respondents now manage SaaS costs or expect to do so within a year, while 98 percent manage AI spend. FinOps is expanding from cloud cost reporting into a broader discipline focused on technology value.

The NET(net) perspective

At NET(net), we view this as a Right-Buying, Right-Licensing and Right-Pricing issue.

Before negotiating a better price, organizations need to know whether they are buying the right capabilities, through the right platforms, under the right commercial model. A 25 percent discount on redundant software is still 75 percent too much software.

That requires more than collecting contracts. It means connecting agreements, deployment, utilization, business requirements and future plans into one defensible picture. Only then can an organization consolidate intelligently, eliminate waste, renegotiate commitments and preserve the tools employees genuinely need.

Shadow AI is not going away. Employees have already discovered that these tools can help them work faster, and suppliers have discovered that AI makes an excellent reason to create a new product tier.

The winning organizations will not be those that stop AI adoption. They will be the ones that can see it, govern it and buy it deliberately.

Because “we think someone in marketing subscribed to that” is not an AI strategy.

About NET(net)

At NET(net), we don't just optimize IT investments, we weaponize them for competitive advantage. As the world's leading technology investment optimization firm, we've spent over two decades perfecting the art and science of extracting maximum value from technology supply chains while neutralizing vendor pricing manipulation.

Our battle - hardened methodology has influenced trillions of dollars in technology investments, captured hundreds of billions in documented value, and transformed how enterprises approach every facet of IT spend - from emerging technology such as AI, ML, IoT, RPA, Quantum, and Blockchain, to IaaS, PaaS, and SaaS, to enterprise hardware and software solutions, and professional services arrangements including strategic outsourcing relationships.

We're not consultants who theorize about optimization, we're the specialists who help you devise and execute your strategy. Our proven frameworks turn vendor pricing chaos into strategic opportunity, licensing complexity into competitive advantage, and cost centers into value engines. Whether you're facing an aggressive vendor audit, navigating a forced migration, or simply refusing to accept runaway IT costs, NET(net) delivers the expertise, experience, and execution you need to dominate rather than merely survive.

Founded in 2002, NET(net) has established itself as the essential strategic partner for enterprises and technology providers who demand performance, not promises. We've mastered every major area of IT optimization because we understand that in today's vendor-hostile environment, half-measures guarantee defeat.

Experience the NET(net) advantage. Contact us at info@netnetweb.com, visit www.netnetweb.com, or call +1 (616) 546-3100 to discover how we can transform your technology investments from cost burden to strategic weapon.

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